A writer must “know and have an ever-present consciousness that this world is a world of fools and rogues… tormented with envy, consumed with vanity; selfish, false, cruel, cursed with illusions… He should free himself of all doctrines, theories, etiquettes, politics…” —Ambrose Bierce (1842-1914?). “The nobility of the writer's occupation lies in resisting oppression, thus in accepting isolation” —Albert Camus (1913-1960). “What are you gonna do” —Bertha Brown (1895-1987).

Friday, April 29, 2016

“Adopt a progressive income tax structure in which the percentage you pay rises with your income” --Eric Zorn of the Chicago Tribune

From Eric Zorn, April 29, 2016:

“Allow me to begin today
by responding to a version of the comment this column will inevitably provoke
from scores of indignant readers: Raise taxes? So those idiots in
Springfield will have even more of our money to spend? Never! Let them cut
spending and reform state government instead!

“Yes, raise taxes.

“We have to. Illinois is
falling further and further into debt every day — $200 million deeper in the
hole every week, budget experts say — and even Failed Gov. Bruce Rauner has
acknowledged that ‘new revenue’ has to be part of any comprehensive solution. We've
lived beyond our means for too long…

“And since the sorts of
regulatory and legal changes Rauner is advancing as part of his ‘turnaround
agenda’ would take years to close that gap (if they would even close it at
all), the question isn't whether the state should raise taxes, but which taxes
it should raise.

“Some have proposed
bringing Illinois in line with neighboring states by broadening sales taxes to
include the sort of services that make up a larger and larger part of our
economy. Others have suggested levying a tax on retirement income, as most states
do, or imposing a 3 percent ‘millionaire's tax’ on income over that threshold.
Many are saying we'll all have to suck it up and raise the flat rate on state
income, which rolled back to 3.75 percent from 5 percent on Jan. 1, 2015.

“The best idea, however,
is for Illinois to adopt a progressive income tax structure in which the
percentage you pay rises with your income. The federal government does it that
way, as do 34 states. Advocates call this a ‘fair tax’ because it shifts the
burden of funding government toward those with a greater ability to pay without
enduring hardship. And though fairness is certainly in the eye of the beholder,
such a tax system does help compensate for the fact that low-wage earners tend
to pay a greater percentage of their income in all taxes and fees combined than
high-wage earners, and it encourages the sort of day-to-day consumer spending
that boosts local economies…” (It's time for Illinois to graduate to a progressive income tax by Eric Zorn).

May 8, 2012:

A Pension Discussion with Eric Zorn, Pt. 2

To Glen:

The law protects all employees against the
sort of discrimination you describe, but very few employees have what you
describe as a “sensible expectation of continued employment,” much as they too
would like to have it. Many reports – including one published in our pages last
year – indicate that it’s so difficult, time consuming and expensive for
administrators to fire tenured teachers for incompetence that they seldom
attempt it.

But let’s not get sidetracked on these broader
issues. I’m sure we agree, along with most of the public, that good teachers
and other union employees should be protected from arbitrary and unfair
treatment, and that bad teachers should be subject to the same consequences for
incompetence as most workers everywhere.

I’m sure we also agree that a deal should be a
deal, whether hindsight suggests it was a good deal or a bad deal. We can go
round and round debating whether the teachers’ promised return on their
retirement investment has been excessively generous – by which I mean greater
than the return would have been if the money had been privately invested and
guaranteed in a way that private investment is not -- but the fact is that this
return was promised to teachers in binding contracts and that the state remains
on the hook for that debt even though it failed to set aside money to pay it.

Where we may disagree is whether the state
should continue, going forward, offering teachers and other public employees
the same pension deals – the same level of return on investment. Particularly
if doing so would require significant tax increases or program and service
cuts.

I realize the state constitution may prevent
even a prospective change in the pension deal, even as I’m sure you realize the
state constitution prevents the implementation of a graduated income tax, which
I’m inferring is what you’re alluding to when you mention our “inequitable
revenue system.”

Is it really unfair – an unconscionable
example of teacher bashing – to say “OK, we’ll make good on what we owe you as
of today, but starting tomorrow (or as of the next contract) there’ll be a new
understanding”? If so, do you have a better idea than just raising taxes to get
us all out of this mess?

Eric Zorn

Dear Eric,

We both know how
emotionally-charged words can incite: describing the pension promise of
teachers as a “good or bad deal” or as “excessively generous” arouses negative
feelings unnecessarily. The fact is these earned benefits are protected by a
“legally binding contract,” as you say, and to “make good on what [the state]
owes as of today” necessitates upholding Article XIII, Section 5 of the
Illinois Constitution:

“Membership in any pension or retirement system of the
State… shall be an enforceable contractual relationship, the benefits of which
shall not be diminished or impaired.”

Teachers acquire a
“vested” right when they enter the pension system. In other words, pension
benefits commence at the time a teacher’s contributions begin. The General
Assembly cannot modify benefits except through an agreed-upon and fair
“modification through contract principles” (Eric Madiar, Is
Welching on Public Pension Promises an Option for Illinois?).

Illinois has a revenue problem and not a
pension problem. Among the many proposals to “get us out of this mess”:
eliminate the tax loophole for “Tax Increment Financing Districts”; eliminate
“Edge Tax Credits” for large corporations; eliminate “Accelerated Depreciation”
or “write offs” of all assets; eliminate “Single Sales Factor” that “allows
large corporations to cut their taxes 80-90 percent, andeliminate “Vendor Discounts” that allow
companies “to keep an uncapped part of their state taxes as a ‘processing’ fee”
(Illinois
Tax Loopholes Cost Illinois Billions). There are many other suggestions,
but these five recommendations would save approximately $2 billon, none of
which raise taxes or require a constitutional amendment.

On the other hand, there is strong case to be
made for a graduated income tax through a constitutional alternation. “Given an
appropriately designed graduated-rate structure, Illinois could cut the overall
state income tax burden for 94 percent of all taxpayers—on average providing a
tax cut to every taxpayer with less than $150,000 in base income annually,
raise at least $2.4 billion more in revenue, and keep the effective individual
income tax rate for millionaires well below five percent…Illinois taxpayers with the bottom 94 percent
of base income collectively would receive an annual tax cut of $1.06 billion…
[T]he combined effect of this policy… would create at least 36,000 private sector
jobs in communities across Illinois… If Illinois were to adopt the same
graduated income tax rate structure as Iowa, Illinois would raise $6.3 billion
more in revenue than it does from its current five-percent flat rate, while
over 54 percent… of all taxpayers would pay less in state income taxes” (The
Case for a Graduated Income Tax in Illinois, The Center for Tax and Budget
Accountability, February 2012).

Though there was a pending bill (HJRCA0012,
February 2011) to amend the state constitution to include a graduated income
tax, the Illinois General Assembly chose to enact legislation giving tax cuts
to profitable corporations instead.Eric, what are your legal and ethical ideas for solving the state’s
structural budget deficit? (A Pension Discussion with Eric Zorn, Pt. 2).

Teacher/Poet/Musician

Copyrights & Fair Use: This blog contains copyrighted material the use of which has not always been specifically authorized by the copyright owner. I am making such material available in my efforts to advance understanding of issues vital to a democracy. I believe this constitutes a “fair use” of any such copyrighted material as provided for in section 107 of the U.S. Copyright Law.

Persona

"I want everything to be explained to me or nothing. And reason is impotent when it hears this cry from the heart. The mind aroused by this insistence seeks and finds nothing but contradiction and nonsense" —Albert Camus (1913-1960).